Jodway

Filing 8

OPINION and ORDER Affirming Bankruptcy Court's Decision to Deny Appellant's Motion to Revoke the Order Confirming Chapter 13 Plan - Signed by District Judge Gershwin A. Drain. (FMos)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

TIMOTHY M. JODWAY and
ALAINA M. ZANKE-JODWAY,
Case No. 16-cv-13241

Appellants,

UNITED STATES DISTRICT COURT JUDGE
GERSHWIN A. DRAIN

v.
FIFTH THIRD BANK, Servicer for FIFTH
THIRD BANK MORTGAGE COMPANY,

UNITED STATES MAGISTRATE JUDGE
MONA K. MAJZOUB

Appellee.
/
OPINION AND ORDER AFFIRMING BANKRUPTCY COURT’S DECISION TO DENY
APPELLANTS’ MOTION TO REVOKE THE ORDER CONFIRMING CHAPTER 13 PLAN
I. INTRODUCTION
This matter is before the Court as an appeal from the Bankruptcy Court for
the Eastern District of Michigan. Appellants filed a motion before the bankruptcy
court, seeking to revoke the order confirming the Chapter 13 Plan. The bankruptcy
court denied that motion and the Appellants appeal. For the reasons that follow, the
Court AFFIRMS the bankruptcy court decision.
II. FACTS
Both Parties unnecessarily complicate the issues in this appeal. As best as
the Court can, it will simplify the facts and arguments made by the Parties.

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The Jodways are well-known to this Court and have a lengthy history before
the bankruptcy court. See Jodway v. Fifth Third Mortg. Co., 557 B.R. 560 (E.D.
Mich. 2016). On August 3, 2005, Tim Jodway and Alaina Zanke-Jodway
(collectively “the Jodways”) took out a mortgage to finance the $649,000 purchase
price of a house. Appellants’ Br., Dkt. No. 6, p. 8 (Pg. ID 763). The home is
located in Boyne City, Michigan and is not the Jodways’ primary residence. On
January 20, 2011, the mortgage was assigned to Appellee, Fifth Third Mortgage
Company. Jodway, 557 B.R. 560, 562. Eventually, the Jodways failed to meet their
mortgage obligations and the Appellee referred the matter to foreclosure. On June
26, 2014, Tim Jodway filed for Chapter 13 relief to stay the foreclosure
proceedings. Bankruptcy R., Dkt. No. 5, p. 291 (Pg. ID 303). On April 10, 2015,
Tim Jodway signed a Chapter 13 Plan, which required payment of about $7000 per
month for 60 months. Id., p. 37 (Pg. ID 51). On May 12, 2015 Bankruptcy Judge
Mark Randon accepted the Plan and issued an order confirming the Plan
(hereinafter the “Order Confirming Plan”). Id., p. 56 (Pg. ID 68).
According to the Jodways, on February 26, 2016, they learned that Mr.
Jodway’s payments (then-totaling $153,562.66) were being held in a suspense
account, rather than being credited to the debt. Id., pp. 410, 416 (Pg. ID 422, 428).
The suspense account is the centerpiece of this appeal.

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On June 25, 2016 the Jodways filed a motion to revoke the Order
Confirming Plan. Id., p. 452 (Pg. ID 464). Judge Randon heard oral argument on
the motion on August 10, 2016. Id., p. 410 (Pg. ID 422). Ruling from the bench,
Judge Randon denied the Jodways’ motion for revocation of the Order Confirming
Plan. Id., p. 421 (Pg. ID 433). Judge Randon followed up his decision with a
written order, which states:
IT IS HEREBY ORDERED that this Court finds the order of
confirmation was not procured by fraud and Debtor and the non-filing
co-debtor’s Motion is untimely under Fed. R. Bankr. P. 9024 and 11
U.S.C. §1330(a).
Dkt. No. 5, p. 4 (Pg. ID 16).
On September 8, 2016, the Jodways filed a notice of appeal from Judge Randon’s
order denying the motion for revocation of the Plan. Dkt. No. 1. Tim Jodway is
represented by his co-debtor, non-bankruptcy-filing spouse, Alaina Zanke-Jodway,
who is licensed to practice law in Michigan.
The only issue on appeal is whether the bankruptcy court erred when it
denied the Jodways’ motion to revoke the Order Confirming Plan.
III. STANDARD OF REVIEW
On appeal of a bankruptcy decision, this court applies the clearly erroneous
standard of review to findings of fact, and reviews questions of law de novo.
Keeley v. Grider, 590 F. App’x 557, 559 (6th Cir. 2014). Therefore, the judgment
of the bankruptcy court shall be reversed only if the ruling is based on “an
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erroneous view of the law or a clearly erroneous assessment of the evidence.” U.S.
v. Dotson, 715 F.3d 576, 582 (6th Cir. 2013) (quoting U.S. v. Semrau, 693 F.3d
510, 520 (6th Cir. 2012)).
IV. OVERVIEW OF CHAPTER 13 BANKRUPTCY
Congress intended Chapter 13 of the Bankruptcy Code to be
utilized by individuals with regular income for the purpose of
adjusting the debts of all creditors in payment of those debts over an
extended period of time. Chapter 13 was designed to protect
overextended individual wage earners desiring to repay their debts
through the automatic stay and provide financial relief through a fresh
start. In essence, a Chapter 13 plan is a contract between the debtor
and the debtor’s creditors that enables the debtor to extend and adjust
his debts. Upon completion of a Chapter 13 plan, the debtor is entitled
to a broad discharge of his or her obligations.
Chapter 13 is designed to serve as a flexible vehicle for the
repayment of part or all of the allowed claims of the debtor. In an
effort to preserve this flexibility Chapter 13 established only a
minimum number of mandatory plan provisions. Yet the Bankruptcy
Code and Rules impose strict deadlines and limitations on debtors
who opt for reorganization over liquidation.
The Bankruptcy Code does, however, set forth certain
provisions that must be included in every Chapter 13 plan, while also
setting forth provisions that the debtor may elect to use at her option.
In order for a Chapter 13 plan to be confirmed the plan must
comply with all provisions of that chapter, which includes the
mandatory provisions of 11 U.S.C.A. § 1322(a). Thus, a document
which does not contain the mandatory provisions under 11 U.S.C.A. §
1322(a) does not constitute a confirmable Chapter 13 plan.
3 Bankruptcy Desk Guide § 29:1.

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V. LAW AND ANALYSIS
A. Revocation of a Chapter 13 Plan
11 U.S.C. § 1330 governs revocation of a Chapter 13 Plan and provides that,
“on request of a party in interest at any time within 180 days after the date of the
entry of an order of confirmation under section 1325 of this title, and after notice
and a hearing, the court may revoke such order if such order was procured by
fraud.” 11 U.S.C. § 1330.
“An order of confirmation of a Chapter 13 plan under 11 U.S.C.A. § 1325
may be revoked if procured by fraud, and only on the grounds of fraud...A
complaint to revoke confirmation cannot be brought after expiration of the 180-day
time limit, even if confirmation was obtained by fraud and the fraud was concealed
until then.” 3 Bankruptcy Desk Guide § 31:76.
In this case, Bankruptcy Judge Randon confirmed Tim Jodway’s Chapter 13
plan on May 15, 2015. Given the 180-day time limit, Mr. Jodway must have
requested revocation no later than November 12, 2015. See FED. R. BANKR. P.
9006 (detailing the proper computation of time in bankruptcy proceedings).
However, Mr. Jodway filed a motion to revoke the Plan on June 25, 2016, over
seven months after the time limit expired. See Dkt. No. 5, p. 452 (Pg. ID 464). At
the bankruptcy court hearing, Judge Randon correctly held that Mr. Jodway’s
motion was untimely. Dkt. No. 5, p. 420 (Pg. ID 432). Judge Randon continued
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that, “[e]ven if it was timely, there would still have to be a finding of fraud to
revoke it. I don’t find either.” Id., p. 420–24 (Pg. ID 432–33). The Court finds that
Judge Randon did not err in applying § 1330.
On appeal the Jodways attempt to sidestep the 180-day time limit imposed
by § 1330 by arguing: (1) violations of due process; (2) judicial taking; and (3)
abuse of bankruptcy process. Neither argument has merit.
1. Alleged Constitutional Violations and Due Process
First, the Jodways argue that, “[a] revocation of confirmation motion based
upon constitutional violations is not subject to the 180-day time limit in § 1330.”
Dkt. No. 6, p. 15 (Pg. ID 777). This argument lacks legal support.
According to Mr. Jodway, the suspense account deprives him of his property
interest in the post-petition payments. Id. He argues that such deprivation is a
violation of due process, which warrants revocation of his Chapter 13 Plan.
In support of his argument, Mr. Jodway relies on Merc. Bank Mtg. Co., LLC
v. NGPCP/BRYS Ctr., LLC, 305 Mich. App. 215 (2014) and In re Hudson, 260
B.R. 421 (Bankr. W.D. Mich. 2001). Neither case binds this Court. Neither case
persuades this Court to grant Mr. Jodway’s desired relief.
a. Merc. Bank Mtg. Co., LLC v. NGPCP/BRYS Ctr.
Merc. Bank Mtg. Co. is a Michigan Court of Appeals case, which held that,
“[t]he mortgagor is entitled to credits on the indebtedness for partial payments
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made before the judgment of foreclosure” Merc. Bank Mtg. Co., 305 Mich. App.
215, 226. Mr. Jodway relies on Merc. Bank for the proposition that he had a legal
right to the reduction in the mortgage balance for the partial payments he made.
Dkt. No. 6, p. 17 (Pg. ID 772). Mr. Jodway’s application of Merc. Bank to his
current situation is flawed. Merc. Bank did not involve a Chapter 13 bankruptcy
plan. Indeed, as best as the Court can tell, the holding in Merc. Bank has never
been applied to a Chapter 13 case, or any bankruptcy case. Accordingly, Mr.
Jodway’s argument is rejected.
b. In re Hudson
Hudson involved a Chapter 13 plan, which provided a specific amount and
interest rate for a creditor-bank’s claim against a debtor. In re Hudson, 260 B.R.
421 (Bankr. W.D. Mich. 2001). The bank received notice of Hudson’s Chapter 13
Bankruptcy Case. Id. at 427. However, the notice and the Plan Summary failed to
advise all creditors that if an objection was lodged to the Chapter 13 plan, a
valuation hearing would take place at the confirmation hearing. Id. The bank made
no objections and did not appear at the confirmation hearing. Id. Subsequently, a
judge approved the Chapter 13 plan.
One week later, the creditor-bank made a claim exceeding the amount and
interest rate specified in the now-confirmed plan. Id. The debtors objected. Id.
Despite the failure to notify the bank of the entire objection procedure, Hudson
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nevertheless held that the confirmed plan bound the bank. Id. at 444–45. Hudson
did not revoke the confirmed plan.
i. In re Ferq and Reliable Electric
Hudson goes on to discuss a 3rd Circuit case, In re Fesq, 153 F.3d 113 (3d
Cir. 1998), which held that “fraud is the only ground for relief available for
revocation of a Chapter 13 confirmation order.” In re Fesq, 153 F.3d 113, 120 (3d
Cir. 1998). However, Hudson goes on to say that, “notwithstanding the Fesq
majority opinion, Rule 90241 may be utilized to set aside or relieve a party from
the effect of a chapter 13 confirmation order when notice is constitutionally
inadequate.” Hudson, 260 B.R. 421, 444.
For this rule, Hudson cites a 10th Circuit case called Reliable Elec. Co. v.
Olson Const. Co., 726 F.2d 620 (10th Cir. 1984). Reliable Elec. Co. involved a
Chapter 11 reorganization in which a creditor did not receive notice of: (1) the time
for filing acceptances or rejections of the Plan; (2) the confirmation hearing; and
(3) the time for filing objections to confirmation. Reliable Elec. Co., 726 F. 2d 620,
622. Based on the lack of notice, the Reliable Elec. Co. panel held that the creditor
was essentially denied an opportunity to be heard at the confirmation hearing,
which amounted to a denial of due process of law. Id. at 632. Because the creditor

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Federal Rule of Bankruptcy Procedure 9024 (“Rule 9024”) governs how a party
can seek relief from the judgment or order of bankruptcy court. Rule 9024
incorporates Federal Rule of Civil Procedure 60 and 11 U.S.C. § 1330.
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was denied notice, the trial court did not subject that creditor to the Chapter 11
plan. Id. The 10th Circuit affirmed the district court’s decision. Id. It is important
to note that neither Ferq nor Reliable Elec. Co. resulted in revocation of a
confirmation order.
Hudson, Ferq and Reliable Elec. Co. are distinguishable from the procedure,
facts, and relief requested in this case. Regarding procedure, there is no indication
that due process was used as a tool or technique to sidestep the statute of
limitations imposed by 11 U.S.C. § 1330, as the Jodways attempt to do in this case.
Turning next to facts, none of those cases involved a debtor seeking relief from a
confirmation order for inadequate notice. Rather, each case involved a creditor
attempting to avoid a confirmation order. Finally, with respect to relief, the cases
are distinguishable because in each case cited by the Appellants, the confirmation
order was affirmed as binding, and not revoked. Therefore Mr. Jodway’s reliance
on Hudson, Ferq and Reliable Elec. Co. is misplaced because his due-process
arguments are not supported by their procedure, facts, or relief.
On the contrary, binding precedent (which Mr. Jodway does not cite) states
that, “[a]bsent a timely appeal, a confirmation order is res judicata and not subject
to collateral attack.” Storey v. Pees, 392 B.R. 266. Mr. Jodway’s attempt to
sidestep the statute of limitations failed. Therefore, because his claims are not
timely, his confirmation order is not subject to attack.
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2. Judicial Taking
Second, Mr. Jodway argues that the bankruptcy court committed a judicial
taking. Dkt. No. 6, p. 21 (Pg. ID 776). According to Mr. Jodway, by allowing the
suspense account to stand, the bankruptcy court changed his entitlement to
contractually receive credit against the mortgage. Id. Even an extremely liberal
reading of the facts in Mr. Jodway’s favor could not support this argument.
“A judicial taking occurs where a court’s decision that does not even
‘arguably conform[ ] to reasonable expectations’ in terms of relevant law of
property rights effects a ‘retroactive transformation of private into public
property.’ ” Ultimate Sportsbar v. United States, 48 Fed. Cl. 540, 550 (2001)
(emphasis added) (citing Hughes v. Washington, 389 U.S. 290, 296, 88 S.Ct. 438,
19 L.Ed.2d 530 (1967) (Stewart, J. concurring)). Here, the facts cannot support a
claim of judicial taking because there is no indication or argument that the funds in
the suspense account have been transferred into public property. Therefore, Mr.
Jodway’s judicial taking argument is rejected.
3. Abuse of Bankruptcy Process
Third, Mr. Jodway argues that the creditor abused the bankruptcy process by
holding funds in the suspense account. This argument confuses the dispositive
issue. This appeal concerns Mr. Jodway’s motion to revoke the confirmation order.
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Pursuant to statute, such a motion must be filed within 180 days. Mr. Jodway failed
to meet that deadline. Even if the creditor did abuse the bankruptcy court, that
finding cannot make Mr. Jodway’s motion timely. Therefore, Mr. Jodway’s abuse
of bankruptcy process argument is meritless, because it cannot compel Mr.
Jodway’s desired remedy. See In re Valenti, 310 B.R. 138, 52 Collier Bankr. Cas.
2d (MB) 403 (B.A.P. 9th Cir. 2004) (“the 180–day bar applies to bar revocation
even if the fraud is not discovered until the period has passed.”) (internal citations
and quotations omitted).
VI. CONCLUSION
For the preceding reasons, the Court will AFFIRM the bankruptcy court’s
decision.
SO ORDERED.
Dated: May 31, 2017
Detroit, MI

s/Gershwin A. Drain___________
HON. GERSHWIN A. DRAIN
United States District Court Judge

I hereby certify that a copy of the foregoing document was mailed to the attorneys
of record on this date, May 31, 2017, by electronic and/or ordinary mail.

/s/Felicia M. Moses for Tanya Bankston
Case Manager, [phone]

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